After losing sales for five years, retailer
Dick Smith
is finally showing rival JB Hi-Fi a clean pair of heels, stealing sales of tablets and computers and triggering fears of another price war in the consumer electronics market.

Dick Smith managing director
Nick Abboud
said sales for the first seven weeks of 2015 had grown more than 10 per cent and like-for-like sales had risen 1.8 per cent – maintaining second-half momentum – as the group opened new stores and reduced prices to win sales.

“We have a high/low pricing strategy – we were in the market more often than we were 12 months ago," Mr Abboud said after reporting a sixfold increase in net profit to $42.1 million for the 12 months ending June.

“While retail was difficult in the second half we were able to work our way through that and hit our numbers."

Analysts said Dick Smith, once considered the market laggard, now appeared to be taking market share from JB Hi-Fi, which last week reported a 5.5 per cent slump in same-store sales for the first few weeks of 2015 and flagged lower than expected sales growth for the year, due mainly to lower sales of tablets.

Dick Smith’s computer sales jumped 50 per cent in the second half while tablet sales rose 30 per cent year on year.

“The group is clearly out-trading JB Hi-Fi and doesn’t seem to be having the issues that JB Hi-Fi reported in the tablets category," said Deutsche Bank analyst
Michael Simotas
.

Dick Smith’s aggressive pricing strategy helped the chain beat its prospectus forecasts and set the stage for further growth in 2015 – prompting 20 per cent shareholder Anchorage Capital to appoint Macquarie Capital to look at options for selling its stake.

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Anchorage bought Dick Smith from Woolworths for $94 million in 2012 and sold all but 20 per cent of its stake last December in a $520 million float, making a profit of $294 million on its 15-month investment.

Anchorage’s 20 per cent stake and about 15 million shares held by management, including Mr Abboud, were released from escrow after the results.

Shares soar 11pc

Anchorage, which believes Dick Smith shares are undervalued, issued a statement on Tuesday saying that in light of recent trading it had no plan to sell its stake at prevailing prices but has appointed Macquarie Capital as financial adviser and broker for the stake.

Macquarie is believed to be considering several options including a share placement to institutions already on the register and a sale to a strategic buyer.

Mr Abboud, who is now entitled to sell 64 per cent of his 6.5 per cent stake, said he intended to retain a “large holding" in the company.

“I will always keep a large holding in the business – there is lots of growth and this year is more exciting than last year," Mr Abboud said

The better than expected result and Anchorage’s attempt to manage the stock overhang sent short-sellers scurrying for cover as Dick Smith shares soared more than 11 per cent, reaching their $2.20 issue price for the first time since April.

“The result provided the market with comfort around the company’s ability to perform despite a sluggish retail environment, with the growth path clearer in terms of new stores, cost-outs and some same-store growth," said Investors Mutual analyst
Julian Beaumont
.

Dick Smith plans to open between 15 and 25 new stores a year for the next three years, lifting store numbers from 377 to 450. At the same time, online sales are expected to grow from around 5 per cent of sales to 10 per cent.

Dick Smith also plans to continue to cut costs and fatten gross margins by striking better deals with suppliers and introducing more private label goods including accessories, baby monitors and security cameras.

The company declared a maiden final dividend of 8¢ a share, representing a payout ratio of 66 per cent, payable October 21.